How to Avoid a Dangerous Gap on Assets for Pension Funds

Though the employer contribution level is set to rise to 3% by 2017, there are concerns that the initial 1% rate may encourage companies to drop existing levels in line with the minimum. Most employers who contribute into a staff pension scheme at present pay around 6%.

Generally speaking, cash balance pension plans resemble defined contribution plans by having an employer credit their employee's retirement account annually. As the employee reaches age 65, they are entitled to receive the cash balance plan benefits (making cash balance pension plans a defined benefits pension plan) in the form of a cash balance that has been deposited to their pension account.

Is underfunding the result of personal greed by city officials who conspired with unions and between themselves to cut deal upon deal to shortchange retirement plans for workers? Or was it ignorance or simply mismanagement of funds? Your point of view is your own but the results speak for themselves.

One thing the private sector can do now to help our economy, and to offset the pain of higher taxes, is to offer development opportunities to all employees in order for their firms to remain competitive and for people to remain qualified as contributing members of our challenged society.

In reality, hardly anyone is likely to do this, but the amount you need to set aside in order to have a comfortable retirement does increase steeply the older you get.

"The cost for state employee pensions is up 2,000 percent in the last ten years, while revenues have only increased by 24 percent. The pension fund will not have enough money to cover this amount, so the state - that means the taxpayer - has to come up with the money. This is money that is taken away from important government services. This is money that cannot go to our universities, our parks and other government functions. Now, for current employees these pensions cannot be changed - either legally or morally. We cannot break the promises we already made. It is a done deal. But we are about to get run over by a locomotive. We can see the light coming at us."

he opaque pension system is incredibly unfair for private sector workers who effectively cover the entire cost of public sector pensions. Most private sector pensions tend to be much riskier than their public sector equivalents where payouts tend to depend upon market performance. Private sector companies tend to make much smaller pension contributions than Governments do to public sector workers. In addition to this, private sector workers pay for public sector pensions via their taxes. The result of this is that private sector workers effectively contribute between 20 percent and 30 percent of their pay towards public sector pensions.

As with standard pension packages, there is no upper limit to the amount that may be invested in a self-directed pension although tax relief is capped to a specific limit.

Yes, it is possible to receive pension a lot less than what you were supposed to receive. The truth of the matter is, company Final Salary Pension Scheme is not 100% safe. Of course, your sponsoring employer would promise to fund your pension until you retire. But there are instances that the employer becomes insolvent; your employer does not have enough funds to pay for your pension. The next thing you know, you become redundant and the pension you were expecting to be your fallback is just a fantasy. If your employer has gone bankrupt, the pension scheme will stop. This does not mean that you get nothing though. The Pension Protection Fund assures you that you will still get something, but not as big as you were supposed to. You have worked so hard for that pension. You do not want that pension to go to waste.